2:1 swap ratio for merger of Bank of Madura, ICICI Bank
IDBI calls board meet to discuss bonus issue
Ministry hunch may spark $ buying rush
Reliance plans to raise limit on FII holding
J H Business Consultant to set up city base
Boost for venture funds
BASF to hiveoff textile dyes business
Banks to review staff strength
Foreign Exchange, Bullion, Stock Indices

Mumbai, Dec 11: 
The board of Bank of Madura (BoM) today approved the bank’s merger with ICICI Bank at a share swap ratio of two BoM shares for every ICICI Bank share. The ICICI board also cleared the proposal at a separate meeting.

Consequent to the merger, the equity capital of ICICI Bank will swell to Rs 219 crore from Rs 197 crore while the shareholding of ICICI, the parent of ICICI Bank, will be reduced to 55.7 per cent from 62 per cent.

On a proforma basis, as on September 30, the merged entity will have total assets of over Rs 16,000 crore and deposits of over Rs 13,100 crore. It will thus create the largest new private sector bank in the country.

“The merger is full of possibilities. The large customer base, geographical reach and infrastructure managed by trained personnel will help us accelerate our growth plans,’’ said H N Sinor, managing director and CEO of ICICI Bank.

ICICI Bank officials said that by virtue of Kotak Mahindra’s stake in BoM, it will now hold 1.2 per cent in the merged entity while the promoter of the south-based bank, K M Thiagarajan, will have a 2.7 per cent stake. ICICI Bank sources also did not rule out the possibility of Thiagarajan being given a board representation in the merged entity.

On the BSE today, shares of the two banks exhibited divergent trends. ICICI Bank closed lower at Rs 165.30 after opening at Rs 180 and touching an intra-day high of Rs 183. Bank of Madura, on the other hand, was locked in the circuit and it closed at Rs 142.10. The counter was marked by only 14 trades with 1065 shares traded.

Considerable synergies are expected to accrue from the combination of ICICI Bank and BoM as they bring together complementary business strengths which would enhance product portfolio, distribution network and brand image. The merged entity will have around 2.6 million customer accounts and an extensive network of about 350 branches spread across the country, giving it the critical mass in an intensely competitive banking arena.

ICICI Bank said the expanded customer base and distribution network of the merged entity will provide considerable cross-selling opportunities enhancing its universal banking strategy. The enlarged distribution network also offers scope to enhance fee income particularly in core areas like cash management services.

BoM has various branches in upcoming semi-urban and rural areas and its micro-credit system is expected to help ICICI Bank reach out to various rural markets. An ICICI Bank official said the bank would now reach over 50 cities as BoM already has a presence there.

“The merger also offers larger amount of low-cost deposits and possibility of reorienting assets profile to enable better spreads for the merged entity,” a press statement said.

The scheme of amalgamation will now be placed before the shareholders of the two banks for their approval on January 19 next year and it will be subject to the approval of the Reserve Bank of India. The appointed date for merger is proposed to be February 1, 2001.

BoM has a national network of 263 branches including presence in each of the top 30 banking centres in the country. It has very low cost deposits at 7.3 per cent.

ICICI Bank’s network of branches and extension counters covers 106 locations across the country.


Mumbai, Dec 11: 
Industial Development Bank of India Ltd (IDBI) is considering a bonus issue.

The leading financial institution today informed the Bombay Stock Exchange (BSE) that its board will meet on December 19 to discuss the proposal. Rumours of a bonus issue from IDBI was doing the rounds for quite sometime in the market with the grapevine suggesting that it could be in the ratio of 3:5.

IDBI shares closed the day at Rs 39.35 from last week’s Rs 37.60. The move is considered as an attempt by the financial institution to reward its shareholders, including its employees who subscribed to IDBI shares at a high premium.

IDBI had tapped the primary market in 1995 with a maiden public issue at a price of Rs 130 per share, aggregating Rs 2,184 crore.

Brokers had been speculating about a long overdue bonus issue and felt the move was to placate its shareholders who have suffered losses.

The financial institution’s plan to restructure its Rs 673.09 crore equity hinges on reducing government holding from 72.14 per cent to 51 per cent which will be initiated by either an equity float in the domestic market or opting for an overseas listing.

The proposed float will bring down the government holding to 58-60 per cent.

Recently, IDBI obtained government’s approval to transfer part of its equity in Sidbi.    

New Delhi, Dec 11: 
The finance ministry feels that the US greenback is likely to further harden against the rupee over the next few months partly due to bearish trends in both the equity and forex markets, with the exchange rate nearing 47.5/dollar by the end of this fiscal.

As a result many administrative ministries have been informally instructing public sector companies under their control that they should advance any hard currency purchases that they may have been contemplating for this fiscal in order to save money.

This ties up well with finance ministry’s attempt to get major road, power generation and transmission projects as well coal exploration plans off the ground by December-January in a bid to show that the government is functioning smoothly. This will give the BJP government the extra mileage during the assembly polls which are slated for February-March next year.

The finance ministry’s forecast is supported by other independent bodies. The Institute of Economic Growth feels the average exchange rate over the next four months would move from 47 in December to 47.32 in March. These forecasts imply the rupee could slide by about 60-70 paise over the next quarter.

In mega projects, such as Prime Minister Atal Behari Vajpayee’s knit India east west road network or east-west power corridors, the foreign exchange component runs into several millions of dollars and even savings of 70 paise to the dollar is considered good.

Ironically, dollar purchases by PSUs now could actually push down rupee value further unless managed and synchronised properly, something which the finance ministry is likely to ask the PSUs to do.

Officials of the department of economic affairs said the impact of State Bank of India’s India Millennium Deposits which mobilised about $ 5.7 billion had kept dollar rates low through November even as it stabilised the foreign exchange position. But they admit that as the IMD will have to be paid back at a hefty interest rate, the foreign exchange market would tend to get more and more bearish.

The high IMD repayment rate would require not only good returns on investments made out of its proceeds but also increase the propensity to export in order to service this debt.

The ministry also feels the trade deficit which stood at $ 9 billion in March this year is likely go up by $ 2 billion by the end of the next fiscal. This will be despite buoyant export growth of about 20-22 per cent and low import growth of about 12 per cent in the coming months.


Mumbai, Dec 11: 
Reliance Industries today said it plans to pass a resolution at the next annual general meeting of its board, expected in six to seven months, to raise the limit for foreign institutional investment (FII) from 24 per cent to 40 per cent.

It comes a day after Morgan Stanley Capital International adjusted its key equity indices for the amount of stock freely available for investors in a move that analysts said will benefit firms with large floats. Indian companies will get a higher free-float weightage if they allow more foreign equity investment.

“The board resolution will require shareholders’ approval. This can happen at the next annual general meeting, likely to be held in June or July,” a company spokesman said. The FII holding in Reliance is currently pegged at 14 per cent.

Another group company, Reliance Petrochemicals, is also considering a hike in its FII cap, now pegged at 24 per cent. The two companies saw brisk FII buying on stock exchanges today, dealers said. The former ended at Rs 346.60 today, up Rs 7.80 while the latter was up Rs 3.40 at Rs 61.95.

The MSCI index is respected by fund managers all across the globe, and its weightages sway their investment decisions. The new parameters mean several Indian companies in the index will find their weightages altered dramatically. They might even be shunned by foreign investors given that the Indian laws cap FII holding in a company at 40 per cent.

The MSCI India Index has some 61 stocks. It is significant for companies that command a large market capitalisation, but have low floating stock. The global financial powerhouse had also raised target market representation of its Standard Index series raised from 60 per cent to 85 per cent.

The index calculates the free float of an equity security as its total number of shares outstanding, minus shareholdings classified as strategic, and shares otherwise restricted from trading by international investors.

Morgan Stanley said companies which have floating stocks of less than 15 per cent for investors will not be included in its equity indices. However, in exceptional cases, where including such a security would significantly improve the index’s accuracy in representing investment opportunities in a country or industry, the share may be included.


Calcutta, Dec 11: 
J. H. Business Consultant, a Michigan-based company that specialises in supply-chain management, will set up shop in the city soon, company president Jay Hazra said here today.

J H Business Consultant, a big global buyer for engineering castings and forging, is the ‘manufacturing consultant of choice’ for global major ABB’s oil and gas business.

“ABB’s annual purchases of castings and forgings runs into millions of dollars and I will look for companies in the region that can ensure quality supplies,” said Hazra, who is on a visit to the city to procure quality-iron castings and forging items.

He will use the visit to project his company’s edge in management consultancy for manufacturing and process industries. He will also hold talks with the Haldia Petrochemicals’ top brass on ways to improve the processes and boost bottomline.

Hazra said his assignment with ABB covers all aspects of supply chain management. Apart from ABB, J. H. Business Consultants also has a large number of medium and large industrial clients spread over the US, Europe, Singapore and other countries in the Far East.


New Delhi, Dec 11: 
Venture capital companies will not have to sell their shares within a year of a firm’s listing to be eligible for tax benefits, Securities and Exchange Board of India (Sebi) president D R Mehta said. The market regulator will meet on January 27 to approve the deletion of this clause.

Addressing a Ficci-organised seminar called ‘A dialogue on venture capital: Industry & Funds’ here today, he said he had the government’s authorisation to abolish the link between tax benefits and exit rules.

Venture funds, which now get tax sops only if they pull out within a year of listing, had long been pressing for the deletion of the exit clause, saying it was a major constraint that hampered the growth of companies in which they invested. Mehta promised more changes later in the month.

The Sebi chief said all venture funds must get themselves registered with the market regulator. “All existing funds are required to register with us under the provisions of the law. Unless they do, they cannot avail of the tax benefits.”

Mehta said the number of registered domestic funds has grown from 8 at the end of 1998 to 31 in January this year, with investments estimated at more than Rs 1,800 crore; another $ 0.5 billion is expected to flow in by the end of 2000-01. Ten more funds are have applied for registration, which is likely to be granted by the end of the current financial year.

He ruled out relaxation in norms that do not allow venture funds to get listed before three years.

“We do not want the public to lose money on the high-risk VCFs which take three years to stabilise.”

Mehta said the remaining recommendations of K B Chandrashekhar Committee will be implemented by the month-end, and an advisory committee constituted to assist the regulator in monitoring venture funds.

Sebi is also considering changes in listing norms that will allow old-economy companies to offload only 10 per cent of the promoters’ equity in a public, issue instead of 25 per cent at present, if the size of the issue is at least Rs 250 crore.


Mumbai, Dec 11: 
BASF India, the speciality chemical major, is transferring its textile dyes business to Dystar India Ltd for a consideration of Rs 7.01 crore. A decision to this effect was taken by the board of the company today. BASF however, said all the fixed assets would remain with the company.

In 1995, Hoechst AG spun off its non-textile business into a new joint venture with Bayer called Dystar AG. Consequently, the textile dyes business of Colour-Chem was transferred to Dystar (India), a 100 per cent subsidiary of Dystar GmbH in 1997.

BASF(India) is a subsidiary of BASF Germany and it has a product portfolio consisting of leather chemicals, textile chemicals, agrochemicals, dispersions, and speciality chemicals and plastics.


Calcutta, Dec 11: 
The finance ministry has directed all nationalised banks to review the strength of their employees afresh before clearing voluntary retirement applications.

Concerned over the impact of the massive response generated by VRS packages, the finance ministry sent a notification to all banks last week asking them to review their manpower position before clearing early-retirement requests.

“Before deciding on the VRS applications, banks must initiate a board-approved manpower planning exercise.”

According to the notification, no recruitment will be allowed to replace those who opt for VRS, which itself will cost the banks awesome amounts of money. Only ‘need-based recruitment’s, that too cautiously, will be permitted, sources said.

Senior officials of the Calcutta-based banks — Uco, UBI and Allahabad Bank — confirmed the move. United Bank of India, one of those yet to declare its VRS package, has started reviewing the size and profile of its employees again.

The finance ministry had earlier conducted a study on the manpower position in the banking industry, and indicated that 25 per cent of the existing workforce could be deemed surplus.

The ministry’s notification, bankers say, has been triggered by the wave of VRS applications from ‘talented employees’. “Their exodus will create a wide gap in the banking industry, which cannot be easily filled up,” bank officials said.

Bank of India, Punjab National Bank, Oriental Bank of Commerce, Indian Bank, Andhra Bank, Allahabad Bank and Uco Bank have so far announced their VRS packages.

Bank of India’s (BoI) offer, for instance, has evoked overwhelming response, with more than 6,000 employees opting for the scheme; Punjab National Bank also received 6,000 VRS applications.

However, a senior BoI official said they are concerned that of those who sent in their applications, there were eight general managers, an equal number of deputy general managers, 30 assistant general managers and more than 100 chief managers.

The banking industry feels that funding banks’ voluntary retirement programme is a major area of concern. However, the government has not agreed to provide financial assistance to banks that have declared early-retirement offers.

“For the finance ministry, it will be a massive cash outflow.. This is, perhaps, the reason why it asked banks to review their manpower position before clearing VRS applications,” the officials said. The strong banks are trying to find the money for their VRS programme, but weak ones like Uco, whose voluntary retirement scheme opens on January 1, funds will be a major constraint.    


Foreign Exchange

US $1	Rs. 46.76	HK $1	Rs. 5.90*
UK £1	Rs. 67.85	SW Fr 1	Rs. 27.00*
Euro	Rs. 41.25	Sing $1	Rs. 26.60*
Yen 100	Rs. 42.21	Aus $1	Rs. 25.10*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4590	Gold Std(10 gm)	Rs.4560
Gold 22 carat	Rs. 4335	Gold 22 carat	Rs.4220
Silver bar (Kg)	Rs. 7750	Silver (Kg)	Rs.7855
Silver portion	Rs. 7850	Silver portion	Rs.7860

Stock Indices

Sensex		4228.29		-4.43
BSE-100		2226.64		-8.59
S&P CNX Nifty	1332.15		-4.25
Calcutta	120.41		-0.04
Skindia GDR	NA		-

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